Smith Dickson, An Accountancy Corporation 


American Taxpayer Relief Act of 2012

The dreaded "fiscal cliff" was averted as legislation was passed on January 1, 2013. The American Taxpayer Relief Act of 2012 (ATRA) permanently extends a number of major tax provisions and temporarily extends many others.  Below is a summary of a few highlights of the Act.  Click on the following link to see a detailed table

  • Tax rates: All the individual marginal tax rates under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) are retained (10%, 15%, 25%, 28%, 33%, and 35%). A new top rate of 39.6% is imposed on taxable income over $400,000 for single filers and $450,000 for married taxpayers filing jointly ($225,000 for each married spouse filing separately).
  • Capital gains: Taxes on capital gains and dividends will be held at their current levels of 15% for individuals earning less than $400,000 and households with income of less than $450,000. The 0% rate is retained for taxpayers in the 10% and 15% brackets. The rate increases to 20% for individual taxpayers and for households above those thresholds.
  • Personal exemptions: Personal exemptions will be phased out and itemized deductions will be limited for taxpayers earning over $250,000 and families earning more than $300,000.
  • Payroll tax increase: The employee portion of the Social Security contributions will return to 6.2% with the expiration of the payroll tax holiday.
  • Alternative Minimum Tax: The AMT will be permanently indexed to inflation, increasing the Alternative Minimum Tax Exemption amount to $50,600 for unmarried taxpayers and $78,750 for married persons filing jointly. These exemption amounts are to increase after 2012 by an inflation adjustment.
  • Estate taxes: The estate and gift tax exclusion amount is retained at $5 million for individuals, indexed for inflation ($10 million for couples). However, the top tax rate increases from 35% to 40% effective Jan. 1, 2013. The estate tax "portability" election, under which, if an election is made, the surviving spouse's exemption amount is increased by the deceased spouse's unused exemption amount, was made permanent by the act.
  • Business tax breaks: The Act extends many business tax credits and other provisions. The Sec. 41 credit for increasing research and development activities, which expired at the end of 2011, has been extended through 2013 and modified. The increased expensing amounts under Sec. 179 are extended through 2013. The 50% bonus depreciation for taxpayers investing in certain capital improvements will also apply through 2013. The 15 year straight-line amortization for qualified leasehold improvements, qualified restaurant buildings, and qualified retail improvements have been extended to January 1, 2014.
  • Tax breaks for working families: The deal includes five-year extensions of the American Opportunity Tax Credit, the Child Tax Credit, and the Earned Income Tax Credit.  

This information contains a general discussion of the relevant federal tax laws. It is not intended for, nor can it be used by any taxpayer for the purpose of avoiding federal tax penalties. Taxpayers should seek the advice of their professional tax and legal advisors regarding any tax and legal issues applicable to their specific circumstances.


Radio Interview

Debbie Dickson was interviewed on the KUCI Ask a Leader live talk radio show to discuss these tax changes.  Listen to her interview at when the show is uploaded.





Smith Dickson is a full-service Southern California CPA firm that specializes in providing high-quality services designed to create long-term value for our clients. Our services include accounting, tax compliance and planning, litigation support, business consulting and estate/trust tax compliance. Please contact us with your questions.

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Smith Dickson, An Accountancy Corporation | 18100 Von Karman Avenue | Suite 420 | Irvine | CA | 92612